When it comes to collecting our money we seem to be stuck between (but accustomed to) two worlds. Most of us understand the effective “new” way, yet seem oddly resigned to employing the "old" way in our own businesses. Let's examine the two.
The old way to collect money looks like this:
Print off an aging statement
Highlight the most troubling accounts
Call the customers
IF they answer, and IF you talk to the person writing the checks, you’re lucky. Most of the time you’ll leave messages and wait for a call back.
You small talk (after all, you don’t want to be rude or lose sales), then awkwardly ask for the money
They typically give you one of these responses: “Check is in the mail” “My customer hasn’t paid me,” transfer blame, sob story “Let me check on something,” give you hope for a quick payment
You hang up and call the next guy on the list.
Repeat process until interrupted
Most of the time, you’ll end this session with no more money than when you started (but can at least hope the mailman brings you some checks you can drive into the bank in a couple days). It’s not surprising that everyone struggles to collect money like this!
Think about this process from the customer’s point of view. He has auto-pay set up with his bank, subscribes to services that automatically bill him monthly, and gets up to the second updates from amazon when his package ships. When he needs to pay his daughter’s school lunch bill, he gets an email with a link to pay. This is the world he lives in, and every time those easy services process, he has less money in his account to pay you.
If you’re not making it just as easy for your customers to pay you, you can expect it to be harder and harder to get yours. What, then, is the ideal system in this industry to optimize cash coming in? Here are 6 critical requirements:
Customers should know what they owe you immediately. Your customers should know their price and have an invoice to pay as soon as they order product from you, not later. If you’re making customers look up an invoice or wonder about a total, you can expect massive delays.
Customers should be able to pay you immediately. They should at least have the option to make the actual transaction right then and there. More and more businesses are becoming accustomed to paying as they order. If you make them wait for a statement, you’re forcing them to pay slowly.
Customers need constant, tasteful reminders. Customers need to know when an invoice is 30 days late, 15 days late, and when you’ll need payment before dropping the next order, among other things. If you do the math, this would take a whole branch of employees to accomplish manually, which is why nobody does it. Software can now completely automate this process and collect your money for you while you focus on other things.
Separate collections from customer service. It’s not effective to be the good cop AND the bad cop. Furthermore, asking for money in person is awkward. Asking for money should be timely, systematic, and non-personal. It might not be “fair”, but systems that ask for money are respected, while people that ask for money seem selfish.
Customers need to be able to self-serve. If you don’t have their balances posted and accessible at all times, you’re making it hard for them to pay you, and they don’t like to “pay to pay you”.
Money needs to transfer quickly, be trackable, and be “real.” Only 5 years ago, you could use a check to buy a burger or pump gas. Today, though, checks are only as good as an I.O.U. A check is only an invitation to go to the bank to see if there is any money behind the paper. Just because a check arrives in an envelope, doesn’t mean it will put money in your bank account. Instead, you need to be able to “see” the money transact in real time.
Breakaway companies realize the power of collecting on what they already produced. Failing to do a good job at collecting your money is more detrimental than producing a bad product, or not landing a deal, because you sunk costs into something that didn’t pay you, rather than just not having it in the first place. In other words, you paid to lose money. Make it easy for your customers to pay you and they almost always will.
If you need help implementing this type of collections system, Allmoxy can help you. On average, our collection system helps companies with an average days aging of 58 days cut it to 29.